This week the focus is Thought No. 9 of the Thirteen Thoughts for 2013, “Better Buying Power Metrics—how do we measure success?” Today marks the third anniversary of the Better Buying Power Initiative. On June 28, 2010, the Department of Defense (DoD) launched the Better Buying Power initiative issuing a memorandum for DoD’s acquisition professionals entitled “Better Buying Power: Mandate for Restoring Affordability and Productivity in Defense Spending.” DoD followed up with a September 14, 2010 memorandum to its acquisition professionals, Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending, outlining 23 principal actions in five general areas to obtain greater efficiency and productivity in defense spending. The memorandum stressed the goal of productivity growth that would enable DoD to DO MORE WITHOUT MORE. The memorandum further stated that the targeted efficiencies could make a significant contribution to achieving a $100 billion redirection of defense budget dollars from unproductive to more productive purposes.
On November 13, 2012, DoD launched Better Buying Power 2.0 with a third memorandum entitled “Better Buying Power 2.0: Continuing the Pursuit for Greater Efficiency and Productivity in Defense Spending.” The November memorandum highlighted 36 initiatives organized into seven focus areas. The seven areas are:
- Achieve affordable programs;
- Control costs throughout the product lifecycle;
- Incentivize productivity and innovation in industry and Government;
- Eliminate unproductive processes and bureaucracy;
- Promote effective competition;
- Improve tradecraft in acquisition of services; and
- Improve the professionalism of the total acquisition workforce.
On April 24th, DoD issued an “Implementation Directive for Better Buying Power 2.0—Achieving Greater Efficiency and Productivity in Defense Spending.” The April directive expanded on the 36 initiatives and seven focus areas. The directive provided new general guidance and identified specific actions in each of the seven areas. The directive also listed four overarching principles that underline the Better Buying Power initiative: (1) Think – The first responsibility of the acquisition workforce is to think; (2) People – Thinking does not do much good if we do not have the professional preparation to think well. Policies and processes are of little use without acquisition professionals who are experienced, trained, and empowered to apply them effectively; (3) Start with the basics ; and (4) Streamline decisions. The four Better Buying Power documents can be found here.
As I read and reread the four Better Buying Power (BBP) policy memoranda it suddenly dawned on me: BBP makes no mention of commercial item contracting! BBP makes no reference to the acquisition of commercial services and products in supporting the mission! This void in BBP is deafening. Commercial item contracting appears to be an afterthought at DoD. More to the point, the last decade has seen a sustained effort to roll back commercial item contracting.
Such an approach reduces access to commercial solutions and increases barriers to entry into the federal marketplace. It is an approach that will have long term strategic consequences for DoD. A system that deemphasizes commercial item contracting in favor of government unique requirements will reduce the pool of firms competing for DoD mission requirements. The firms remaining in a closed market will be structured to comply with the government unique requirements. It will result in a closed system that will, over the long term, significantly increase costs and reduce quality.
The competitive dynamic of the commercial marketplace drives efficiency, productivity and innovation. At a time of reduced fiscal resources—reliance on streamlined, competitive commercial item contracting should be a strategic procurement imperative. To truly “DO MORE WITHOUT MORE” commercial item contracting should be a fundamental part of BBP!
The Coalition for Government Procurement joined the Professional Services Council (PSC) and TechAmerica in a letter to GSA urging a balanced response to a recent Office of Inspector General (OIG) audit report criticizing management intervention in negotiations of Multiple Award Schedule (MAS) contracts.
The June 4, 2013 GSA OIG Report, entitled “Improper Management Intervention in Multiple Award Schedule Contracts” included recommendations that FAS management:
- Not intervene in contracting actions in response to requests from contractors except for instances of misconduct or other serious administrative issues;
- Fully document all conversations and correspondence with contractor officials regarding specific contracts and offers, to include such information as date, time, participants, and specific details of information exchanged.
The multi-association letter to Federal Acquisition Service (FAS) Commissioner Tom Sharpe in response to the report expresses concern that implementation of the OIG’s recommendations will have a chilling effect on the role of GSA’s procurement managers in MAS program operations. Valuable communications between agency officials and the contractor community will also be reduced. These communications have consistently been encouraged by the Office of Federal Procurement Policy and other directives to improve procurement outcomes.
The Coalition for Government Procurement, with TechAmerica and PSC, urges GSA to take a more balanced approach to ensure a fair, impartial, and transparent acquisition system that delivers best value to customer agencies and the American people. We recommend that GSA:
- Reduce the need for management intervention by:
- Clarifying MAS pricing policies;
- Training contracting officers, contractors and auditors to assure a common understanding of major contractual provisions;
- Speed negotiations by streamlining the solicitation and award processes;
- Encourage appropriate management involvement in MAS negotiations by:
- Establishing an escalation process within acquisition organizations aimed at developing creative resolutions to negotiation obstacles
- Establishing a GSA Schedule Ombudsman to assist with issues not resolved by the acquisition organization;
- Publish policies and procedures for public comment or, at a minimum provide public notice, prior to implementation; and
- Engage our organizations in a Myth-buster dialogue on the issues raised in the OIG report and the GSA implementation actions.
The Coalition looks forward to engaging in a dialogue about these recommendations with GSA and our industry colleagues. To read the multi-association letter to GSA, visit https://thecgp.org/images/Multi-Association-Response-6-25-13.pdf.
On Thursday night, the Senate unanimously confirmed the nominations of Dan Tangehrlini to be the Administrator of the General Services Administration and Howard Shelanski to be Administrator of the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget.
On Wednesday the Coalition convened its Small Business Committee to discuss current contract initiatives and policies concerning small business. The committee appreciated having Calvin Jenkins of the Small Business Administration (SBA) as a guest to speak about new SBA initiatives. Mr. Jenkins, Deputy Associate Administrator for Government Contracting and Business Development, is the highest career contracting executive at SBA. Robert ‘Robin’ Bourne, Director of the MAS Program Office in the FAS Office of Acquisition Management, also spoke about GSA’s role in the implementation of recent small business rules, training for the acquisition workforce, and government policies for payment of small business subcontractors. The meeting allowed member companies to speak directly with government leaders, ask questions and voice concerns. Increasing subcontracting opportunities for small business, small business set-asides, the non-manufacturer rule, and contractor team arrangements were among the many topics discussed. The Coalition thanks our government speakers, Mr. Jenkins and Mr. Bourne, and looks forward to having more “myth-buster’s” discussions as part of the Small Business Committee in the near future.
An interim rule was published on June 21, 2013 amending the Federal Acquisition Regulation (FAR) concerning End User License Agreements (EULAs). The rule titled, “Terms of Service and Open-Ended Indemnification, and Unenforceability of Unauthorized Obligations” is primarily focused on open-ended indemnification clauses for social media applications. However, the interim rule states that commercial EULAs could also result in a violation of the Anti-deficiency Act if the legal liability to the government exceeds an agency’s appropriation. In response to this concern and a recommendation by the Office of Management and Budget, the interim rule amends FAR parts 12, 13, 32, 42 and 52 to provide additional guidance and clauses to address purchases containing EULAs. The effective date is June 21, 2013. According to the rule, the purpose is to “clarify that the inclusion of an open-ended indemnification clause in a EULA, TOS, or other agreement, is not binding on the Government unless expressly authorized by law and shall be deemed to be stricken from the EULA, TOS, or similar legal instrument or agreement.”
For further analysis of the interim rule by McKenna Long, please read this month’s Legal Corner. The Coalition will be submitting comments on the interim rule through the EULA Working Group. Comments are due August 20, 2013.
On Tuesday, Jim Ghiloni of GSA’s OASIS program spoke to Coalition members from the OASIS Working Group and GWAC/MAC and Enterprise Contracting Committee. Jim discussed with members GSA’s recent release of its revised draft RFPs for OASIS and OASIS Small Business. GSA is currently finalizing the supplemental attachments to be included in the final release of the RFP. Jim informed members that the final RFPs are slated for a mid-July release after the 4th. If anything is to change and the release date is pushed to August, Jim Ghiloni said that he will notify industry through Interact. GSA is also reaching out to customer agencies about the benefits of the upcoming OASIS contract. Members are encouraged to submit comments on the draft RFPs at email@example.com as soon as possible. Awards will be made in the October timeframe, Ghiloni stated.
A new tool at the Department of Defense is changing the way contracting officers (COs) conduct business. According to a report from FCW, the Contractor Business Analysis Repository (CBAR) gives contracting officers unprecedented access to contractor financial information. In an interview with Shay Assad, the Pentagon’s director of defense pricing, FCW learns that COs throughout the Department can access detailed pricing data on past business deals that both a specific company and a specific division had with the Pentagon. The goal of the new tool is to provide the government with a more informed acquisition workforce and strengthen the government’s position at the bargaining table. Beginning in early 2012, the CBAR provided nearly 2,000 users with information such as contractor pricing rates and compliance with cost accounting standards,” according to FCW. However, Assad notes that not every contracting officer gets access to the CBAR, saying it is tightly controlled and CBAR use is monitored.
In a March 12 memo, Assad wrote that beginning on June 24, for all negotiated pricing actions of more than $25 million, contracting officers will upload data on pre-negotiation objectives and contract negotiations into the CBAR.
In his interview with FCW, Assad also commented on the DoD’s business with GSA. “There’s a role for GSA to play with us,” Assad said. “And one of the things we’ve urged the GSA to do is we would like to see some schedules established where we could use them for the procurement of services on a cost-reimbursable basis, as well as fixed price.”
On Wednesday, the FAR Council issued an interim rule in Federal Acquisition Circular (FAC) 2005-68. Due to the implementation of Section 803 of the National Defense Authorization Act for Fiscal Year 2012, the limitation on the allowability of compensation costs for certain contractor personnel has been expanded to apply to all contractor employees under Department of Defense, NASA, and Coast Guard contracts rather than just the top five executives. This rule applies section 803 prospectively to contracts awarded on or after the date of enactment of section 803 (which was December 31, 2011), to the contractor compensation costs incurred after January 1, 2012. Written comments are due on or before August 26, 2013 to be considered in the writing of a final rule. If you have any questions or comments on this topic, please contact Aubrey Woolley at firstname.lastname@example.org or (202) 315-1053.
Beware the Anti-Deficiency Act and the New Interim Rule Regarding Indemnification Clauses in Social Media and License Agreements
By Jason N. Workmaster, Partner & Marques O. Peterson, Associate, McKenna Long & Aldridge LLP
On June 21, 2013, the FAR Council issued an immediately-effective interim rule that provides that any indemnification clause that is included in an End User License Agreement (EULA), Terms of Service (TOS), or similar legal instrument and that would create a violation of the Anti-Deficiency Act (31 U.S.C. § 1341) (the “ADA”) is unenforceable against the Government—regardless of actions a contracting officer might have taken indicating acceptance of the clause. See 78 Fed. Reg. 37,686 (Jun. 21, 2013). The ADA is a Federal statute that, among other things, prohibits government employees from entering into an “obligation exceeding an amount available in an appropriation or fund for [that] obligation.” 31 U.S.C. § 1341(a)(1(A). The FAR Council issued the interim rule “to address concerns [relating to the ADA] raised in an opinion from the U.S. Department of Justice (DOJ), Office of Legal Counsel (OLC) involving the use of unrestricted, open-ended indemnification clauses in acquisitions for social media applications,” even though the Government contends that, even without the regulatory change, the clauses in questions were unenforceable under existing law. Id.
Recently, government officials have become concerned about the use by government employees of internet based social media applications and licenses, and the specific terms of their respective agreements for these applications. The concern arose from the recognition that many supplies or services purchased by government employees through social media applications are subject to supplier license agreements, particularly in information technology acquisitions. As a result, in a March 2012 opinion, OLC addressed the circumstance in which a government purchase card holder, in the course of registering for a social media or license agreement account, consents to an online TOS agreement that holds the provider of the service harmless in the event that harm is caused to a third party when the application is used by the Government. According to the OLC, such a circumstance amounts to the government employee binding the Government, without statutory authorization or other exception, to an open-ended, unrestricted indemnification term. The OLC contends that this constitutes an ADA violation because the agency’s agreement to an open-ended indemnification clause, such as the TOS described above, could result in the agency’s legal liability for an amount in excess of the agency’s appropriation.
Responding to the OLC opinion, the Office of Management and Budget (OMB) issued a memorandum on April 4, 2013 outlining management actions to ensure agencies act in compliance with the ADA and consistent with the OLC opinion. See OMB Guidance M-13-10, Antideficiency Act implications of Certain Online Terms of Service Agreements, available at http://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-10.pdf.
Prompted by the OMB memorandum, the FAR Council drafted this interim rule to address the perceived risk of an alleged ADA violation arising from indemnification clauses in the TOS of social media products. Moreover, the interim rule raises the possibility of additional coverage in the FAR to address other clauses in these TOSs that the Government apparently believes may create ADA violations. For example, the FAR Council highlighted a clause – one requiring the automatic renewal of subscription service – that it asserts might violate the ADA if it obligated the Government to pay for supplies or services in advance of the agency’s appropriation. Such additional coverage, however, was left to another day and is not included in the current interim rule.
Instead, for now, the interim rule amends FAR parts 12, 13, 32, 43, and 52 to state that indemnification clauses that violate the ADA are unenforceable, as noted above. While adding little to existing law, it is likely that these changes will make it at least somewhat harder for contractors to demonstrate that the Government is bound by these indemnification provisions—which the Government contends were unenforceable anyway.
In any event, written comments about the rule are due to the Regulatory Secretariat on or before August 20, 2013, and this interim rule is a good reminder that the Government remains vigilant about using the ADA and its regulation-making power to the fullest extent possible.
The Department of Defense (DoD) issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to simplify prescriptions for provisions and clauses that are applicable to the acquisition of commercial items and to specify flowdown of clauses to commercial subcontracts. The purpose of this case is to support the use of automated contract writing systems. Rather than requiring the contracting officers to check the applicable clauses, this final rule will allow automated contract writing systems to automatically select the applicable clauses, saving DoD time and scarce resources. According to DoD, nothing substantive will change in commercial acquisitions for potential offerors, only the appearance of how applicable clauses are presented. For more details please refer to the final rule.
Premier Member Event – July 18th
The Coalition would like to express our appreciation for our Premier (and Keystone) members by hosting our 2nd complimentary “Premier Only Event” of 2013. Please join us in a discussion of FAS operational issues with Tom Sharpe, Commissioner of the Federal Acquisition Service. The event will be held at the GDIT offices in Merrifield on July 18th at 11:30 am (lunch will be served), and is open to Premier and Keystone members only. Please click here to register. If you would like to discuss joining as a Premier Member, please contact Denise Mileski at email@example.com or (202)-315-1055.